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7 April, 09:17

Busch Company has these obligations at December 31. For each obligation, indicate whether it should be classified as a current liability, long-term liability, or both. (a) A note payable for $100,000 due in 2 years. select a balance sheet section (b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. select a balance sheet section (c) Interest payable of $15,000 on the mortgage. select a balance sheet section (d) Accounts payable of $60,000.

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  1. 7 April, 10:02
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    A. Long Term Liability

    B. Long Term Liability

    C. Current Liability

    D. Current Liability

    Explanation:

    Liability is a financial burden or obligation to pay.

    Short term liabilities (Current) are the liabilities due & payable within one accounting year. Long term (Non current) liabilities are the liabilities due & payable over a long period of time, more than an accounting year.

    A note payable for $100,000 due in 2 years : is payable beyond one accounting year, hence Long term liability

    A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments : is also payable beyond one accounting year, hence Long term liability

    Interest payable of $15,000 on the mortgage (outstanding expense) has been accrued already & is now due to be paid within current accounting year, hence Current Liability. [All other interests payable in long run are however Long Term Liability]

    Accounts payable of $60,000 : are likely to be payable within one accounting year, hence Current liability
  2. 7 April, 10:13
    0
    The categorization is shown below:

    Explanation:

    The categorization is shown below:

    (a) A note payable for $100,000 due in 2 years = Long term liabilities as it is exceeded one year

    (b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. = Current liabilities and the long term liabilities. The annual payment is considered current liabilities and from next year it would be considered as long term liabilities

    (c) Interest payable of $15,000 on the mortgage = Current liabilities as it is for one year

    (d) Accounts payable of $60,000. = Current liabilities as it is for one year
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